♪ ♪
>> NARRATOR: It was an
unremarkable morning in a
wealthy enclave just north of
Phoenix...
>> Let's get to this breaking
news right now.
Federal agents have arrested
the billionaire founder and
former C.E.O. of a
pharmaceutical company right
here in Phoenix.
>> NARRATOR: Until federal
agents launched a raid on the
home of billionaire John Kapoor.
>> 74-year-old Kapoor is
the most significant
pharmaceutical executive to be
criminally charged thus far in
the nationwide opioid crisis.
>> Why? 'Cause there's no
evidence against him.
He didn't do anything wrong.
>> I've never seen anything
like this.
These doctors were writing
massive volumes of
prescriptions for one of the
most dangerous drugs on the
market.
>> No, he wasn't.
>> No, he was not doing that,
either.
>> NARRATOR: John Kapoor's
arrest was a watershed in the
opioid crisis-- and a warning
to corporate America.
>> Going to take a look at
shares of Insys Therapeutics.
They're falling more than 18%
today on news that executives
from the pharmaceutical company
have been arrested
on racketeering charges.
>> Wall Street loves a success
story-- everybody does,
Wall Street just loves it more.
And John Kapoor had a great
story to sell.
(cameras clicking)
>> It's a terrible thing, but
he's got nothing to do with it.
>> NARRATOR: With colleagues at
the "Financial Times," we've
been investigating opioid
manufacturer Insys Therapeutics
and its founder.
>> There simply weren't enough
people who were joining up the
dots, to ask the question of,
"Is this legal?
What's really driving these
profits, and is it good for
society more widely?"
♪♪
>> NARRATOR: This is a story
that starts with pain-- the
kind that's so severe, people
become desperate for relief.
John Kapoor understood that pain
and thought he could help.
>> I met John Kapoor here in
Phoenix.
He had come to Arizona from
Chicago and developed Insys
Corporation to try and produce
some medication that would help
with cancer pain and its
symptoms.
>> NARRATOR: Dr. Lisa Jo Stearns
is one of eight people
connected with Insys who
agreed to speak to us about
their experiences with Kapoor
and his drug.
>> Kapoor's wife had died of,
with breast cancer.
She had developed quite a deal
of pain.
He had tears well up in his
eyes when speaking about his
wife, and that his main mission
now was to try and help decrease
the amount of suffering for
patients.
I believed that he was somebody
that could help us change the
way that we have cancer pain
treatment in America.
(audience applauding)
>> NARRATOR: He was, at the
time, one of the drug industry's
most successful entrepreneurs.
>> I know there are all kinds
of definitions for
entrepreneurs.
The one that I think we all
recognize most is that
entrepreneurs are risk-takers.
Entrepreneurs are also dreamers.
♪ ♪
My dream started in India.
And my dream was to come to
this country.
I was fortunate that I was able
to get a fellowship at State
University of New York at
Buffalo, where I did my PhD in
medicinal chemistry.
>> NARRATOR: Kapoor had taken
his chemistry degree and gone
into business.
Between 1981 and 2002, he
started and invested in more
than a dozen pharmaceuticals.
Over those two decades, he
developed a reputation-- he was
ruthless in pursuit of profits.
Roddy Boyd is a former
hedge-fund analyst turned
investigative reporter who's
covered Kapoor's career.
>> He sold his first company to
the Japanese for about $800
million.
But his factories were known
for their rampant violations.
He cut corners left, right,
and center, to the point where
they took it over and found
that the actual formulation of
these drugs were so problematic
that they had to halt
production.
>> NARRATOR: It wasn't an
isolated incident.
Violations and lawsuits littered
his path.
But that didn't get in the way
of him becoming a billionaire.
>> We were the first of the
investors who built the
category in pharma today called
specialty pharma, where you
pick up products, and then you
add some twist to it to make it
better, different, and promote
it to your sales force.
By promoting, you can build
those products.
>> NARRATOR: One of Kapoor's
innovative and lucrative twists:
he'd taken an existing heart
drug, turned it into a spray,
and marked up the price.
With Insys, he'd try the same
thing using fentanyl, a
synthetic opioid up to 100
times more powerful than
morphine.
It's often used by doctors to
treat end-stage cancer pain,
like the kind his wife had
experienced.
>> Fentanyl, it's very
addictive, and it's very
dangerous if used, um, in the
wrong way.
But if used in the right way,
it's a godsend to many patients.
>> NARRATOR: Kapoor called his
new fentanyl spray Subsys.
Dr. Stearns was a principal
investigator of a Subsys
clinical trial.
>> There were other fentanyl
products that people were
utilizing for breakthrough pain.
But they took anywhere from 15
to 45 minutes to work.
But then Subsys comes along
and patients would, within five
minutes, get a clinical response
and feel better.
I thought that that was, um,
amazing.
♪ ♪
>> NARRATOR: John Kapoor
launched Subsys in the spring of
2012, after the FDA approved it
for treating breakthrough pain
in cancer patients.
>> Subsys comes in individual
blister packages.
Do not open the blister package
until you're ready to use it.
>> NARRATOR: But Subsys sales
were lackluster for the first
six months.
>> We prescribed maybe a couple
of prescriptions a week.
Because there weren't a lot of
people that needed to be
managed that acutely.
>> NARRATOR: Behind closed
doors, Kapoor said Subsys was
the worst launch in
pharmaceutical history.
He was furious.
>> For John Kapoor, this is,
simply put, not acceptable
level of business.
And the first national director
of sales was fired in a few
months.
They brought in Alec Burlakoff,
and lo and behold, things
changed.
>> NARRATOR: Alec Burlakoff had
spent close to six years in
pharmaceutical sales.
He would become central to the
rise of Insys, and its ultimate
fall.
>> You want me to do anything,
or just, uh...
>> No, no, you can just look
around.
>> NARRATOR: This is his first
on-camera interview, conducted
under the supervision of
federal authorities.
>> When was the first time that
you met John Kapoor?
>> Approximately April of 2012.
They're on a fast track to
going under.
My basic understanding is lack
of sales results.
I mean, I come to every
interview with more passion and
enthusiasm than I like to think
anybody else can bring to the
table.
And I can tell you that when I
interviewed for the sales
manager position, that
interview ended with Dr. Kapoor
pounding the desk saying, "This
is our next VP of sales."
I left thinking, "This is the
opportunity that, of a
lifetime, I've been waiting
for my whole life.
I've always wanted to work with
a billionaire."
>> Alec Burlakoff, I thought,
was a genius and definitely
knew how to, I don't know how,
build a sales team that quick,
that fast, and make the company
go where it did.
>> You could see the guy can
sell, only because of the way
he connects with people.
And you throw in a lot of
enthusiasm, where you see
someone genuinely looking to
help you become successful
financially, you can't help but
to gravitate toward him.
>> His mantra was, "By any
means necessary, get the job
done."
It's from sunup to sundown, and
by any means necessary.
>> NARRATOR: These three former
sales insiders, who were let go
by the company, were the few who
would go on camera to tell us
about an unbridled sales culture
at Insys.
>> It wasn't about cancer
patients.
It was about getting as many
people as you could on the drug.
>> NARRATOR: With $80 million
on the line, Kapoor was Insys's
principal investor.
He wanted his money back-- and
more.
>> The instruction was, go out
there, show that we can get a
minimum return on investment of
two to one, minimum-- and do not
lose his money-- or get fired.
And the only way that I knew
how to do it, uh, to get that
guarantee, is to bribe doctors.
>> You're saying bribery, like,
you're kind of...
>> Yes, I am.
>> That has a really kind of
big meaning, that word.
>> Yes.
I think to use any other word
would be irresponsible of me
at this point, I mean...
>> Back then, did you think,
"Oh, I'm going to go bribe
people?"
>> Yes.
(people talking in background)
>> How did you know what you
needed to do?
>> From my experience in the
industry.
>> NARRATOR: Burlakoff told us
how he boosted sales, turning
to the legal industry practice
of paying doctors to appear at
professional gatherings.
They're called "speaker
programs."
>> It is a very common practice,
something that I'm very
familiar with from my days back
at Eli Lilly as a rep, at
Johnson and Johnson, at
Cephalon.
The only difference is, at
Insys, no one cared if there,
if anybody showed up to the
programs and if the doctor even
spoke.
The only thing that mattered
was the bottom line.
>> I have here documented
my day-to-day schedule.
I had a speaker program, if
that's what you want to call it.
The infamous dinner program,
May 17.
>> NARRATOR: April Moore was a
new sales rep at the time,
working for one of Burlakoff's
handpicked managers.
She was told to focus on one
doctor in Chicago, Dr. Paul
Madison.
>> Sunrise Lee was my manager.
She told me, "You want to get
Dr. Madison out to do speaker
programs.
Push speaker programs, because
that's money."
I was told there were going
to be approximately 11 to 13
doctors.
And not one doctor showed up.
Dr. Madison saw one of his
friends.
So Sunrise had Dr. Madison's
friend and the date forge
signatures of other doctors
that were supposed to be at
this dinner program.
So that Dr. Madison could get
paid.
He got anywhere between $1,200
to $1,500 for that speaker
program.
>> Dr. Kapoor insisted on
actually tracking the number
of prescriptions that the
speaker prescribed, which had
never been done in any other
company I've been involved in.
We were getting daily data, a
report that would show a
correlation between the number
of dollars that they were paid
in honorarium to speak by Insys
Therapeutics, and the number of
dollars that they provided to
Insys via prescriptions of
Subsys.
Again, minimum of two dollars
for every one dollar we spent.
>> NARRATOR: Dr. Madison made
an estimated $86,000 in speaker
fees, and wrote at least
$1.2 million in Subsys
prescriptions.
He told us he didn't do
anything improper with the
speaker programs or
overprescribe Subsys.
He hasn't been charged for the
crime related to Insys, but his
medical license was revoked in
Illinois.
Inside the company, doctors
like Madison were known as
whales.
>> My reps would get up at 5:00
or 6:00.
They'd drive around from
doctor's office to doctor's
office.
The ones that, with lines of
patients sitting in the parking
lot, on the floor drinking
Mountain Dew?
Pretty good tell-tale sign that
that's going to be the doctor
that you're going to want to
engage with.
>> NARRATOR: They were pain
doctors, in strip mall clinics,
row house offices, even
suburban hospitals.
>> The office probably could
very well have been described
as a pill mill.
The percentage of patients that
had direct cancer-related pain
was zero to one percent.
>> NARRATOR: Heather Alfonso was
an Insys whale-- the only one
willing to talk on camera.
>> The bulk of my responsibility
was signing prescriptions.
Altogether, with my time with
Subsys, I made about $83,000,
which, in the whole scope of
things, isn't very much now, is
it?
>> The scope of things being
what?
>> Considering how much they
all made.
>> Let's just talk about the
money, then.
You say yourself that you were
motivated by it.
>> Yes, of course I was
motivated by the money.
>> What do you mean, "of
course"?
I mean...
I mean, well, I'll be honest,
you're, you're a healthcare
provider, and you're...
There are these lines that one,
providers are not supposed to
cross.
>> Right.
>> So tell me about, why were
you crossing those lines?
>> What lines?
Well, because, see, in my mind,
understand this.
I was prescribing a medication
anyway.
Prescribe one called Subsys or
one called Fentora, or add some
more oxycodone to the streets.
I mean, one way or another,
something was getting
prescribed.
>> And the speaker's money, did
it change your prescribing
patterns?
>> Absolutely, the speaker's
money changed my prescribing
patterns, yes.
Because if I'm going to add a
medication, I'm going to be
more apt to add Subsys that,
you know, supplements my income.
I have five children, and
having a significant other who
wasn't bringing in the income
to help pay the bills, this
additional money was something
that I needed.
>> It all comes down to
targeting.
You gotta find their hot button.
Whatever makes them tick.
And it sounds ruthless.
And it is ruthless, that we
would target someone that's in
distress in an effort to take
advantage of them.
>> NARRATOR: Burlakoff told us
that once the sales reps
had their marks, they'd
pressure the prescribers to
write ever-higher doses of
Subsys, a process known as
titration.
>> It was a directive from Dr.
John Kapoor that we roll out
this effective dose campaign,
which was basically all about
titration.
If the doctor's not escalating
the dose quickly, then we have
an issue.
>> NARRATOR: Subsys was
measured in micrograms.
100 micrograms was the lowest,
1,600 the highest, a
prescription worth up to
$60,000 a month to the company.
And the sales reps benefited,
as well.
>> This is where the dirt is,
this is probably the most
guilty thing in the company.
If you had a doctor that
wrote a prescription, it was
a bonus on your paycheck.
>> Low doses aren't that much
money.
Higher dose, more money.
>> If you reach the 1,600
micrograms of fentanyl...
That could kill you, but people
were getting there.
>> NARRATOR: They even held
contests for the sales team.
The higher the doses they got
their doctors to write, the
higher the cash prize.
>> Three, two, one, cut!
>> NARRATOR: John Kapoor's
business was booming.
He returned to his alma mater
to commemorate a new pharmacy
building named after him and
his late wife.
>> I must tell you, I'm really,
really humbled with all the
kind words that have been said
about me.
They're only half-right.
(audience laughs)
No.
>> NARRATOR: Wall Street was
paying attention.
♪ ♪
David Amsellem is a stock
analyst who advises
institutional investors.
His reports would help influence
Insys's rise on Wall Street.
>> Initially, I was skeptical
that the company would be able
to be successful commercially
with Subsys, you know.
It's a highly competitive
marketplace.
What was interesting is, the
sales and the volumes really
started to take off.
And that, I think, made an
impression on a number of us
in the investor and analyst
community.
>> Over at the NASDAQ, Insys
Therapeutics, a specialty
pharma company.
>> NARRATOR: Insys went public
in May 2013.
>> Good morning, and welcome
to Insys Therapeutics'
operating results conference
call.
I'll turn the call over to
Insys C.E.O. Michael Babich.
>> Thank you for taking the
time out of your day to join us
for our first conference call
as a public company.
>> NARRATOR: John Kapoor hired
Michael Babich in 2001 to help
manage his stock portfolio.
Babich was recently out of
college.
Kapoor grew to trust him over
the next decade, and chose him
to be C.E.O. and the public face
of Insys.
>> This has been a rip-roaring
stock for you guys.
The I.P.O.'s been fantastic.
Tell us what it is about Insys
that has investors so excited.
>> Mike Babich had no
background in pharma.
That, I thought, was striking.
Here he is, the C.E.O. of the
company.
As I got to know him, though,
he seemed to say all the right
things.
>> Our first commercial product,
branded product, is called
Subsys, and it's a sublingual
spray of fentanyl which is
approved for breakthrough cancer
pain.
And we believe this platform
is very important for the future
of drug delivery.
>> NARRATOR: Within five months
of its I.P.O., Insys shares
shot up 400%.
And John Kapoor's $80 million
personal investment was worth
close to $550 million.
Investors were doing well, too.
>> A lot of biopharma companies
are not even generating
any revenues.
Here was a company with a
product on the market that was
starting to see some success.
So that I found attractive.
>> Um, so, so tell me what, what
you thought was up.
When a company's share price
goes ballistic like that,
yes, it may be because they
discovered a new innovation
that's so exciting and good for
mankind that it's going to
carry on indefinitely, but
that's a pretty rare example.
Usually, there's something in
that that's just too good to be
true.
♪ ♪
>> NARRATOR: It was just months
after Subsys was launched that
the first whistleblowers began
to emerge.
>> I first heard about Insys in
the end of 2013.
One of the chief civil lawyers
in our office forwarded me
a whistleblower complaint.
I was at the time the chief of
the healthcare fraud unit
of the United States
attorney's office in Boston.
All of the whistleblowers made
similar allegations.
All over the country, these
doctors were being bribed and
were writing massive volumes of
prescriptions for one of the
most dangerous drugs on the
market.
Every investigation of one of
these companies starts with,
is it possible to go after them
criminally?
But they're always very
difficult.
We're talking with, with the
FDA, we're talking within our
group about ways to move cases
along.
>> NARRATOR: The company
announced it was being
investigated.
Word spread on Wall Street.
>> I would say there was
something of a collective shrug.
There had been a whole host of
investigations of other
companies-- companies that are
industry leaders, and big fines
that were paid.
And so, I think the market
looked at this as another
investigation, one of many.
>> NARRATOR: Insys' stock price
rose.
By early 2014, John Kapoor's
investment was approaching
$1 billion in value.
>> And around 2014, I started to
publish research on Insys.
>> And you recommended it to
investors to buy.
>> I did recommend it, yes.
>> NARRATOR: But a handful of
high-level investors were not
buying the Insys story.
>> There's a class of investors
who go short.
They take out bets on the idea
that the stock price is going
to fall.
It's a rather, if you like,
sick and perverted mentality,
you might say.
But without them, we would have
a financial system that's a lot
less effective, because in a
way, shorts often keep the rest
of the system honest.
>> NARRATOR: Jim Carruthers was
one of those short sellers.
He'd just started his own
investment firm.
>> Someone had told us that
there were only a small number
of doctors that were, um,
approximately, you know, 50% of
their entire revenue.
Remember, this is a drug that,
it specifically had a warning
to be given to breakthrough
cancer patients only.
We discovered that the primary
prescribers are pain med
doctors.
And then, when you did any kind
of background check on these
pain med doctors, what you
really found was, in our
opinion, pill mills.
>> NARRATOR: By then, Subsys was
turning up in federal busts
of pill mills across the U.S.
>> There are a couple of things
going on that are incredibly
helpful.
The U.S. attorney's office in
Michigan is prosecuting a
doctor out there named Gavin
Awerbuch.
They've talked to patients,
they've done surveillance,
they've actually had some
undercover buys.
At one point, he was the
largest prescriber of Subsys in
the United States.
>> NARRATOR: Gavin Awerbuch was
in fact Insys's biggest whale.
For $138,000 in speaking fees
and other gifts from the
company, he prescribed at least
$7 million worth of Subsys.
♪ ♪
>> When we heard about those
first headlines, you know,
naturally, I, I asked management
about them.
And I wasn't the only one.
>> They were quick to point out
that there was a wide audience
of physicians who were writing
prescriptions.
Now, I couldn't see that kind of
data from my own research.
You know, you, you want to
believe that management teams
are going to be honest.
And so, they were very, very
clear: It's a bad actor, or one
or two bad actors.
And, and this, there, there
isn't anything to worry about
here.
>> NARRATOR: Within days of Dr.
Awerbuch's arrest, Katie Thomas
of "The New York Times"
published the first national
exposé on Insys.
>> I got a tip to look into
this company and look into
their marketing practices.
The thing that caught my
attention was, this is a very
dangerous product.
If it was misused, it could
actually kill people.
But if you googled Insys, you
would see a lot of, you know,
people talking about it from a
Wall Street point of view, and
how it's a stock to watch.
>> NARRATOR: She found one
analyst hyping the company's
titration strategy: "high doses
driving higher revenues."
>> This idea that the patients
as they became more addicted,
essentially-- he didn't use
that word-- but, and needed
higher doses, this would be,
you know, a good reliable
revenue growth stream for the,
for the company.
>> Katie Thomas writes her
story for "The New York Times,"
and the stock goes from 20 to
12, roughly.
We thought, "Okay, the market's
seen what is going on here.
They've reacted."
We continued to follow this
story for a number of months,
and the stock price pops back
up to about $25 or so.
There were people on Wall Street
who were intent on keeping this
stock price up and, I believe,
ignoring some of the more
obvious indications that this
was a, um, unsustainable,
potentially fraudulent
business model.
>> November of 2014, I get a
package from a source of mine,
Jim Carruthers, and he has some
tips about Insys Therapeutics.
At some level, he's being
somewhat self-serving, right?
He wants me to do my own work,
write a story about it,
hopefully the stock price
declines, and he makes a profit.
But there was a story here, and
I was just blown away.
So I hopped on LinkedIn and
found current and former
employees, and began reaching
out to them.
>> NARRATOR: What Boyd
discovered went beyond titration
and no-show speaker programs.
It was a decadent sales culture
in service of one goal.
>> Alec Burlakoff created
a culture that the only thing
that mattered was a
prescription of Subsys.
What it took did not matter,
and he was very clear about
that.
>> ♪ 2015, let me begin ♪
♪ Insys Therapeutics ♪
♪ That is our name ♪
♪ We're raising the bar ♪
♪ And we're changing the game ♪
>> NARRATOR: His sales reps,
like the ones who created this
rap video for a company-wide
contest, bought in.
>> ♪ Like they never seen ♪
♪ Going deeper than Dan ♪
♪ In a submarine ♪
>> He argued strongly that if
you're producing, you know, you
should have a lot of fun.
>> ♪ We're making history ♪
♪ Because we're great ♪
♪ By choice ♪
♪ I love titration ♪
♪ Yeah, that's not a problem ♪
♪ I got new patients ♪
♪ And I got a lot of them ♪
>> He encouraged, or at least
tolerated, doctors and female
staff having affairs.
>> ♪ I got new patients ♪
♪ And I got a lot of them ♪
♪ If you want to be great ♪
♪ Listen to my voice ♪
♪ You can be great ♪
♪ But it's your choice ♪
>> Sex with a doctor, or
chartering a private jet and
taking a couple of doctors
to, say, Cancun, Mexico, it's
been done.
>> ♪ And I got a lot of them ♪
>> I encouraged these people,
implored them, to form
relationships.
>> ♪ If you want to be great ♪
♪ Listen to my voice ♪
♪ You can be great ♪
♪ But it's your choice ♪
>> Because with relationship
comes what? Trust.
>> Whoo!
>> And if there is no trust
there, they certainly are not
going to get involved in a quid
pro quo situation.
>> ♪ I love titration ♪
♪ Yeah, that's not a problem ♪
(boat engine humming)
>> NARRATOR: Burlakoff and
Kapoor picked people without
pharma experience for the sales
team.
Like Tim Neely, a former
firefighter.
Before he was let go in 2015,
he says he was one of Insys's
top ten sales reps.
>> I can tell you about my own
experience with Insys, and
going in for the first week of
training, all right?
(chuckles): Retirement from the
fire department, diving into
some crazy pharmaceutical sales
company, and I didn't really
know anything.
Our class, no one had a degree
in pharmaceutical sales, period.
I mean, we had a guy that
played pro football, and a girl
that posed for "Playboy" before.
I think our company was more
about, "Can we trust you?"
It's like selling heroin on the
streets.
>> NARRATOR: They also hired
inexperienced people for senior
management positions.
>> A saleswoman told me about
Sunrise Lee, who oversaw the
entire Midwest.
The only Sunrise Lee that I
could track had been a dancer
at a gentlemen's club in
Florida.
She has no pharmaceutical
background, no science
background.
>> NARRATOR: Burlakoff put Lee
in charge of a region with two
of Insys's whales, Dr. Paul
Madison and Dr. Gavin Awerbuch.
She wouldn't speak to us.
But when Boyd was reporting,
she said that she was under
federal investigation for Insys'
sales practices.
>> I was not nearly as concerned
at hiring a former "Playboy"
model or a former exotic dancer
as I was assessing whether or
not they had what I call,
unfortunately, a killer
instinct.
Almost no conscience.
♪ ♪
>> NARRATOR: When Boyd finally
published his story, he also
made the first link to a death
from Subsys.
>> Carolyn Markland had back
pain.
She had taken Subsys the night
before and literally died with
it on her bed.
>> NARRATOR: Carolyn Markland's
doctor had been a paid speaker
for Insys.
>> We put it out, and I got a
lot of emails from people on
Wall Street who felt that I
didn't understand what I was
talking about.
>> NARRATOR: Boyd stayed focused
on the story, and soon made a
discovery that would have
impact.
>> Insys had what I call the
killer app in its ability to
get its drug approved.
And their hack, as it were, is
simply to lie to the insurance
companies.
>> NARRATOR: It was called the
Insurance Reimbursement Center,
I.R.C., an internal group at
Insys that dealt directly with
insurance companies.
>> NARRATOR: Boyd's reporting
on their practices caught the
attention of federal
investigators.
>> When you're in a
pharmaceutical company, you
have to do two things.
First, you gotta get the doctor
to write, and the second thing
you do is, you gotta get
somebody to pay for it.
In the industry, 35, 40%
approval rate for a drug like
this, it was the normal
standard.
Kapoor thought that was
outrageous.
And so, he was telling people,
"I want, like, 100% approval
rate."
>> NARRATOR: Special Agent
Vivian Barrios works in the
FBI's healthcare fraud unit.
>> I started going to Arizona
pretty frequently to speak with
as many of the I.R.C. employees
as I could.
I did speak with a woman, and
she basically talked about that
scheme that they had, which was
misleading insurers.
>> NARRATOR: She was a
prior-authorization specialist
for Insys, and would become a
key source for the
investigators.
She agreed to speak to us if we
concealed her identity.
>> I was the gatekeeper in
between your doctor and the
pharmacy.
And I was doing what I really
thought was helping people,
until I found out that it
wasn't helping people.
>> Really, the prior-
authorization specialist should
have no control over whether or
not it does or does not get
approved, because a patient
either meets the conditions or
they don't.
>> So when it was a non-cancer
patient, you were supposed to
use this blurb or spiel.
The spiel was only talking
about what the medication was
intended for, and so that was
meant to confuse the person on
the phone.
>> That seems like a pretty
straightforward question.
Does a patient have cancer?
Yes, no.
>> So the indication is, the
doctor knows what it's been
indicated for, he's treating
the pain.
I didn't exactly say the person
has cancer, but I, but I
indicated it.
>> None of what we were saying
was truthful.
We're just pocketing the money
off of a prescription that
should've never been approved
anyway.
That's insurance fraud.
>> Starting in 2012, you can
see at the very beginning that
the, that the net revenue, it
starts out low.
And then, as you go into 2013,
when the I.R.C. starts, net
revenue goes way up-- why?
Because they're turning around
and getting insurance
prescriptions faster, and
they're getting more, and so
they're, they're getting a
larger net revenue.
♪ ♪
>> The spray that we launched
three years ago today, this year
will do close to $300 million.
And our market share is
approaching 50% of the market.
>> Everybody in the office was
meticulously checking their
phones all throughout the day
to see where the stock was at.
And I had maybe $8 million, on
paper.
That was based on the stock
price as it was at its peak.
>> So you should have a dream,
you should believe in yourself,
and one important thing is, stay
humble.
>> NARRATOR: But there were
increasing consequences.
♪ ♪
>> I had a large population
of patients who had been
prescribed Subsys by their
clinicians for chronic pain
conditions that were now
addicts.
It created this very craving,
addictive-like personality that
they hadn't had before they
used it.
>> NARRATOR: Subsys was being
implicated in hundreds of
deaths.
>> ...on 13 Action News live at
3:00, a Henderson judge found
dead in her home.
>> A powerful painkiller was in
her system at the time of her
death.
>> NARRATOR: Diana Hampton was
a municipal judge in Henderson,
Nevada, outside Las Vegas.
>> Diana became addicted
to fentanyl.
She'd been having problems
with back pain.
Diana definitely fell into
addiction as a result of pain
management.
This is the paraphernalia that
I got from her house.
This was the fentanyl.
♪ ♪
>> NARRATOR: She was seeing a
Las Vegas pain doctor, one of
the largest prescribers of
Subsys in Nevada.
Later, he was arrested, and pled
guilty to giving her hundreds
of used Subsys canisters.
>> Diana was extracting the
leftover out of the Subsys
bottles and shooting them into
her arm.
I realized that in Diana's
position, death was probably a
better alternative than the
exposure.
She would lose her job, she'd
lose her judgeship.
She would be shamed.
♪ ♪
>> I didn't think about the
patient, the people suffering,
the addiction.
The, uh, the deaths.
I imagined that I was selling a
widget.
All these lives that are being
affected, I managed to...
successfully compartmentalize,
where it wasn't in the
forefront on a daily basis.
Because if it was, I would not
be able to do my job.
>> NARRATOR: News reports
on Insys continued to surface.
Some of the biggest prescribers
of Subsys had been charged,
including Gavin Awerbuch
and Heather Alfonso, who'd
ultimately take pleas.
And the investigation of Kapoor
and his company was closing in.
>> We got more than a terabyte
of information from the company
by way of subpoena.
One of the really good pieces of
evidence against Mike Babich
was this office-wide email
saying, "I thought we owned
the top guys."
♪ ♪
>> NARRATOR: Feeling the
pressure, Kapoor made a
strategic move.
One night after work, he took
the man who had been beside him
for 14 years to get a drink.
There, Babich would later
recall, Kapoor told him, "Every
company goes through struggles,
and when things like that
happen, there's always a fall
guy."
Then he told him, "You're going
to be the fall guy."
Good morning and welcome to the
Insys Therapeutics third quarter
2015 earnings call.
I'd like to turn the call over
to Dr. Kapoor.
>> Today we announce that
Michael Babich has stepped down
as president and chief
executive officer of Insys.
I will assume the additional
role of president and C.E.O.
>> NARRATOR: Soon, amid tension
with Kapoor, Burlakoff would
leave the company.
(waves crashing)
>> I was in California having
lunch on the water, and I get a
phone call.
I go, "This is my lawyer."
And we don't talk a lot, so I
pick up the phone, and he says,
"Alec, you are the subject of a
federal investigation.
Like, any day now, like, within
24 hours.
You need to get a criminal
attorney yesterday."
♪ ♪
>> Burlakoff left a message for
me at the Massachusetts
attorney general's office.
It was this bizarre moment, he
said he'd just fired his lawyer
and he wanted to come in and
talk.
That's never happened before.
>> I had spent my entire life
talking my way out of murky
situations, and I thought I
could do it again.
>> NARRATOR: Alec Burlakoff
agreed to meet us one more time
near his home in Florida.
He told us what happened next.
>> I purposefully went in
without a lawyer.
I met with a assistant U.S.
attorney, an FBI agent, and
somebody who was typing on the
computer, taking notes.
>> Did they ask you if you
bribed doctors?
>> I don't recall specifically,
but I believe so.
And if they did, I would have
said something along the lines
of, "Yes, the company bribed
doctors."
But I wouldn't have taken
complete responsibility for
myself and the fact that I was
directly involved in that.
>> And you knew you that were
lying to them?
>> Yes, yes, I knew that I was
lying, yes.
>> It was very clear that he
had a story he was trying to
sell, which was not reflected
in our investigation.
>> You know, I let him talk.
I asked him very few questions.
He was a very good salesman, he
is a very good salesman, and I
think he was confident in his
ability that he could, could
turn us.
At the end of the conversation,
I told him I thought he'd been
lying to us the entire time he'd
been talking to us.
And we sent him on his way.
(wind blowing)
>> NARRATOR: Within months,
there was enough evidence to
move to the next phase of the
case against Insys-- arrests.
♪ ♪
>> We charged Babich and five
other defendants.
Michael Gurry ran the Insys
reimbursement center.
Joe Rowan was responsible for a
third of the U.S. sales force
for Insys.
Richard Simon, the former
national director of sales.
Sunrise Lee, who was also a
regional sales manager, and
then Alec Burlakoff.
We thought about charging
Kapoor at the time, but we
didn't have enough evidence to
go forward at that point.
>> NARRATOR: Kapoor made
changes.
Toni Paskoski was promoted to
take over sales.
>> In 2016, things began to
change significantly.
Mostly because of the news
coverage, the media coverage.
The opioid epidemic was rising.
The reputation of the
organization was obviously
hindered.
A new director for market access
told Dr. Kapoor, along with some
of us, that some friends "told
me that your company is toxic."
I mean, "We can't touch you
right now."
These were high executives
representing the insurance
companies.
>> I stopped recommending
the stock in, in 2017.
Subsys was not going to recover.
>> NARRATOR: And then came
October 26, 2017.
>> What do you think about
the opioid crisis going on?
>> It's a terrible thing, but
he's got nothing to do with it.
>> John Kapoor has been
arrested today in Arizona.
The stock's down 34% even
before today, and then you can
see the plunge that we are
seeing if you include today's
action.
>> Looking back at 2014-2015,
we did not know they were
bribing doctors.
You know, we try our very best
to believe that management is
saying and doing the right
thing.
That's not naïveté, I think,
that's just a part of doing our
jobs.
Um, it's about trust.
When management is telling us
something over and over again,
um, there's a part of us that
say, "Okay, they seem like
they're saying and doing all
the right things."
Okay?
♪ ♪
>> I believe we took the
position off in early 2018, when
the stock had fallen to
mid-single digits.
This was not a company brought
down by short sellers.
This was a company that was
brought down by its own reckless
abuse of the system.
>> How much did you make?
>> I'm not going to disclose
how much we made.
But it was a good, it was a
good bet.
(train horn blows)
>> NARRATOR: In Boston, federal
prosecutors prepared the case
against Insys.
They would pursue a novel
strategy: using
anti-racketeering laws designed
to fight organized crime.
(people talking in background)
Fred Wyshak, renowned for
prosecuting mob kingpins like
Whitey Bulger, was brought on
to the case.
♪ ♪
>> Well, the racketeering
statute, the RICO, was passed
in about 1970, directly aiming
at organized crime, the mafia.
Now we were able to indict
the whole organization.
For example, the Winter Hill
Gang in Boston.
We did a classic investigation.
We started at the bottom of the
pyramid and we started taking
out the bookies, and the loan
sharks, and the drug dealers.
Get those individuals to
cooperate, and that was a key
to our success.
>> NARRATOR: Now they would try
with Insys, methodically moving
up the organizational chart,
closing in on John Kapoor.
>> Alec Burlakoff, he had built
a trap for himself.
You know, coming in and talking
to prosecutors for four or five
hours on tape and lying, he had
created this piece of evidence
that, uh, you know, was going
to be devastating to him if he
went to trial.
(waves lapping)
>> I made the decision to plead
guilty and cooperate fully.
And I'm going to cooperate like
nobody's business.
>> NARRATOR: Alec Burlakoff had
become a witness for the
prosecution.
And soon, Michael Babich turned,
as well.
>> 42-year-old Michael Babich
leaving federal court after
pleading guilty to being part
of a conspiracy to bribe
medical professionals.
>> It was important to have
Babich.
I mean, to me, that's the top
step before the tip of the
pyramid, you know.
With Alec Burlakoff, right
below Babich.
>> As part of his plea, Babich
has agreed to cooperate with
the government, and their case
against Insys founder John
Kapoor heads to trial later
this month.
♪ ♪
>> NARRATOR: In January 2019,
John Kapoor became the first
pharmaceutical C.E.O. to be
tried criminally under the
federal anti-racketeering law.
Over the next ten weeks,
federal prosecutors implicated
four Insys executives of
widespread corruption, with
John Kapoor as the architect,
from emails connecting Kapoor
to paying off doctors to
testimony saying he approved
the scheme to defraud insurance
companies.
And they played the titration
rap video.
♪ ♪
>> John Kapoor became very
withdrawn once he saw his
closest confidantes, like Alec
Burlakoff, like Michael Babich,
turning on him.
And, you know, obviously, these
guys are self-interested.
They're doing it to save their
own necks, too.
>> Alec Burlakoff was on
the stand for five days.
He connected everyone around
the country back to the
decision-making that was going
on at corporate headquarters.
♪ ♪
>> NARRATOR: The prosecution's
most damning evidence, a
spreadsheet ordered up by
Kapoor, showing how Insys
tracked the money that went to
doctors and what the company got
in return.
>> I called it a smoking gun.
I mean, it was about this
return on investment theory that
Kapoor had, and that's
criminal.
So you might as well be
writing out a confession.
♪ ♪
>> NARRATOR: After two weeks,
the jury delivered an
unprecedented guilty verdict
against John Kapoor and four
Insys senior executives.
>> This case was the first to
bring criminal charges against
the most senior executives of a
publicly traded pharma company
for their role in the opioid
epidemic.
This is not only about
punishing these defendants.
It's about making the next
pharma company think hard about
its basic responsibilities as a
corporate entity and about not
victimizing the public so it can
make more money.
>> NARRATOR: Kapoor was
sentenced to five-and-a-half
years in prison.
He is appealing the decision.
Pending that, his lawyer told
us, he would not participate
in this film.
Babich and four other executives
all received shorter sentences.
>> When executives go to jail,
that sends out a pretty serious
message to the wider business
and financial community.
And certainly, with the Insys
story, that message will be
pretty clear-cut to the rest of
the pharmaceutical world.
>> When I look at John Kapoor
now, I'm very conflicted.
Because I see the man that told
me about his wife and how she
suffered with cancer, and how
horrible that was.
And then I see this guy that
heads this company that's evil.
>> NARRATOR: For his role, Alec
Burlakoff was sentenced to 26
months in prison.
>> Dr. Kapoor, he tells you how
to run the business.
You decide, however, whether or
not you want to participate in
it.
And I decided that I would, and
that was wrong.
Well, and I'm going to prison as
a result of it.
Captioned by
Media Access Group at WGBH
access.wgbh.org
>> For more on this and other
"Frontline" programs, visit our
website at pbs.org/frontline.
♪ ♪
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♪ ♪